What exactly is Excise Tax?
The UAE implemented an excise tax in 2017 and it went into effect on October 1. Excise tax is essentially an indirect tax levied on specified items that are thought to be harmful to the environment or human health. Excise goods are items or products that are subject to excise duty.
The abovementioned law applies at a 100% rate to items such as energy drinks and tobacco, and at a 50% rate to carbonated drinks.
Audit of Excise Tax
It is the procedure through which a registered taxable entity's excise tax liability for a certain tax period is validated. The goal of the excise tax audit procedure is to ensure that the reported excise tax due is correct and submitted to the tax authorities by the deadline.
What does a taxable person require in the event of an Excise Tax Audit?
A registered taxable entity that is subject to an Excise Tax Audit must collaborate with the auditor and give him with full support during the tax audit. If the taxable entity has a legal agent or/and a tax adviser, they must also fully cooperate with the auditor. To assist the auditor with regard to the Tax Audit, the taxable entity/person must follow the procedures below:
The auditor must be allowed to enter the registered office(s) of the taxable person. • The auditor must have access to any papers and records deemed essential for the audit of the entity's excise tax due.
Persons in charge of excise tax-related operations must be available for questioning by the auditor during the tax audit process.
HOW NADEEM AND UMENDRA CHARTERED ACCOUNTANTS CAN ASSIST YOU
Our team of audit and tax specialists will assist you in ensuring that you are properly prepared for an Excise Tax Audit.
Our strategy would first comprise the verification of all documentation relevant to excise items, as well as an assessment of whether the records kept are in accordance with UAE tax rules.
Our tax specialists will double-check the tax estimated by the taxable entity/person to ensure that it is correct.
On a certain day, we will conduct a stock count to check the physical inventory stored and maintained by the taxable person/entity and quantify exceptions if any exist.
Records must be kept in accordance with UAE Excise Tax Law.
According to UAE excise legislation, a registered taxable entity/person is expected to preserve and maintain the following documents:
Records and accompanying documentation for all Excise products/goods imported, manufactured, or stored.
Proof of excise items sold outside of the UAE.
Documentation supporting the export of excise items from the UAE.
A detailed record of the taxable person's physical inventory.
Maintain a record of excise products that have been lost or destroyed.
Tax record pertaining to tax owing on excise items imported into the UAE by the taxable person.
Tax record pertaining to tax owing on excise items made in the UAE by the taxable person.
Tax record pertaining to tax owing on excise items purchased or manufactured for the purpose of stockpiling.
Reports required by the Tax Authority
The auditor or the FTA may request that the taxable person produce the following reports:
A report including item-by-item data about excise items physically held by the taxable person in terms of value and quantity.
Report including information on the taxable person's average monthly inventory.
A report including information on the average monthly sale of each excise item.
A report detailing the taxable person's purchases of excise items from outside the UAE (Import).
All of the above-mentioned reports for the one-year period before the adoption of the Excise Tax.
For the purpose of tax audit, the FTA may additionally seek the following reports/information from any taxable person registered for Excise tax in the UAE from October 1, 2017:
The auditor has the authority to demand the following from the taxable person: